P15-6 (continued)
For Semiannual
2. Period Ended
6/30/10 12/31/10
Interest revenue $3,435a $4,597b
3. Balance Sheet As of
Current assets: 06/30/10 12/31/10
Temporary investment in available-for-sale
P15-7
1. 2010
Feb. 3 Investment in Available-for-Sale
Securities 36,000
Cash (3,000 x $12) 36,000
P15-7 (continued)
1. (continued)
Sept. 1 Investment in Available-for-Sale
Securities 88,000
Cash (4,000 x $22) 88,000
1 Cash ($30,000 x 1.01) 30,300
Investment in Available-for-Sale
Securities 30,000
Gain on Sale of Available-for-Sale
Securities ($30,300 – $30,000) 300
31 Cash 1,200
Interest Revenue ($20,000 x
0.12 x 6/12) 1,200
P15-7 (continued)
1. (continued)
Cumulative
12/31/10 Change in
*Security Cost Fair Value Fair Value
$20,000 face value of Solomon Co. bonds $ 20,000 $ 20,200a $ 200
3. Current assets:
Temporary investment in available-for-sale securities
P15-8
Note to Instructor: This problem contains petty cash journal entries and a bank
reconciliation, previously covered in Chapter 7.
1. 2010
Jan. 1 Investment in Available-for-Sale
Securities [(150 x $20) +
(200 x $30) + (100 x $25)] 11,500
Cash 11,500
15-44
P15-8 (continued)
1. (continued)
Feb. 28 Cash 1,200
28 Cash Short and Over 5.35a
Cash 5.35
a$125.50 – ($500.00 – $369.15)
Mar. 31 Cash ($1,500 + $600) 2,100
31 Unrealized Increase/Decrease
in Value of Available-for-Sale
P15-8 (continued)
2. PAYNE CORPORATION
Bank Reconciliation
March 31, 2010
Balance per bank statement $13,459.75
Add: Deposits in transit 2,100.00
$15,559.75
3. 2010
Mar. 31 Cash 1,600
Notes Receivable 1,500
P15-9
HYDE CORPORATION
Bond Investment Interest Revenue
and Premium Amortization Schedule
Effective Interest Method
Date
Cash
Debita
Interest Revenue
Creditb
Investment in
Debt Securities
Creditc
Carrying Value
of Debt
Securitiesd
P15-9 (continued)
aBonds outstanding x 0.13 x 1/2 + Cash received to retire bonds
fDifference due to $0.03 rounding error
2010
Jan. 1 Investment in Held-to-Maturity
Debt Securities 308,373.53
Cash 308,373.53
2011
Mar. 31 Interest Revenue [($150,000 x 0.13 x
1/4) – ($306,318.50 x 1/2 x
0.12 x 1/4)] 280.22
15-47
P15-9 (continued)
June 30 Cash 9,750.00
Interest Revenue 9,189.56
Investment in Held-to-Maturity
Debt Securities 560.44
Dec. 31 Cash 9,750.00
Interest Revenue 9,082.50
Investment in Held-to-Maturity
Debt Securities 667.50
15-48
P15-10
1. a. TUDOR COMPANY
Bond Investment Interest Revenue
and Discount Amortization Schedule
Straight-Line Method
Date
Cash
Debita
Investment in
Debt Securities
Debitc
Interest Revenue
Creditb
Carrying Value
of Debt
Securitiesd
01/01/10
$487,706.69
1. b. TUDOR COMPANY
Bond Investment Interest Revenue
and Discount Amortization Schedule
Effective Interest Method
Date
Cash
Debita
Interest Revenue
Creditb
Investment in
Debt Securities
Debitc
Carrying Value
of Debt
Securitiesd
01/01/10
$487,706.69
P15-10 (continued)
1.b. (continued)
a$500,000 x 0.11 x ½ year
2. Straight-Line Method:
2012
Effective Interest Method:
2012
July 1 Cash 27,500.00
P15-11
1. 2009
Oct. 1 Investment in Held-to-Maturity
Debt Securities
P15-11 (continued)
1. (continued)
2010
June 30 Cash 10,500
Investment in Held-to-Maturity
Debt Securities ($225 x 6) 1,350
Investment Revenue 11,850
2. If the company failed to separately record the interest at acquisition, the
interest revenue for 2009 would be overstated and the value of the held-to-
P15-12
1. a. MERCER CORPORATION
Bond Investment Interest Revenue
and Premium Amortization Schedule
Straight-Line Method
Date
Cash
Debita
Investment in
Debt Securities
Creditc
Interest Revenue
Creditb
Carrying Value
of Debt
Securitiesd
06/30/09
12/31/09
$24,000
$1,665.19
$22,334.81
$409,991.12
408,325.93
1. b. MERCER CORPORATION
Bond Investment Interest Revenue
and Premium Amortization Schedule
Effective Interest Method
Date
Cash
Debita
Interest Revenue
Creditb
Investment in
Debt Securities
Creditc
Carrying Value
of Debt
Securitiesd
06/30/09
12/31/09
$24,000
$22,549.51
$1,450.49
$409,991.12
408,540.63
P15-12 (continued)
1.b. (continued)
2. a. 2009
Dec. 31 Cash 24,000
Investment in Held-to-Maturity
2. b. 2009
Dec. 31 Cash 24,000
Investment in Held-to-Maturity
15-53
P15-13
MARK CORPORATION
Bond Investment Interest Revenue
and Discount Amortization Schedule
Effective Interest Method
Date
Cash
Debita
Interest Revenue
Creditb
Investment in
Debt Securities
Debitc
Carrying Value
of Debt
Securitiesd
01/01/10
06/30/10
$ 25,000
$28,524.82
$ 3,524.82
$475,413.60
478,938.42
a$500,000 x 0.10 x ½ year (on 1/1/12 face value reduced to $375,000)
fDifference due to $0.24 rounding error
2010
Jan. 1 Investment in Held-to-Maturity
Debt Securities 475,413.60
Cash 475,413.60
15-54
P15-13 (continued)
2011
June 30 Cash 25,000.00
2012
Jan. 1 Cash 127,000
Investment in Held-to-Maturity
Debt Securities (from schedule) 122,708.33
Gain on Sale of Debt Securities 4,291.67
P15-14
1. a. 2009
Jan. 1 Investment in Available-for-Sale
15-55
P15-14 (continued)
1.a. (continued)
Dec. 31 Unrealized Increase/Decrease
in Value of Available-for-Sale
No entry for reported net income
2010
Dec. 31 Cash ($35,000 x 0.20) 7,000
Dividend Revenue 7,000
No entry for reported net income
1. b. 2009
Jan. 1 Investment in Stock: Garvey 160,000
Cash (40,000 x $4.00) 160,000
15-56
P15-14 (continued)
1.b. (continued)
2010
2. a. 2011
Jan. 4 Cash ($4.25 x 10,000) 42,500
Investment in Available-for-Sale
Securities
2. b. 2011
Jan. 4 Cash ($4.25 x 10,000) 42,500
Loss on Sale of Equity Investment 2,750